February 20, 2005

Finding the Right Level of Customer Service

Imagine Amazon.com answering each technical query with a
personal phone call and following up with a thank-you note one week later. Or Cingular dispatching a technical
crew to investigate the slightest technical hiccup with my cell phone.

While it would be great to simply get a person when you call customer support, it is
also very expensive. Generally, the resources
required increase exponentially with the quality of customer service provided. The secret is then not to go overboard, but
instead to focus resources on the two or three customer service attributes your
core customers value the most.

Which brings me to Zappos.com, the self-proclaimed “web’s
most popular shoe store.” I am a huge
fan. I placed my most recent order
Thursday afternoon. Not only was
shipping free for the pair I wanted, but I received an e-mail saying that I was
upgraded to overnight shipping. I had my
shoes Friday afternoon.

They have a 365-day return policy, provided you return the
shoes in the same shape that you received them in. I have never returned any shoes, but it is as
simple as printing a shipping label from their site. And it’s free.

And with that, they have addressed the two largest potential
hang-ups for online shoe consumers: 1)
waiting for things in the mail really sucks, and 2) what if they don’t fit?

Sequoia-backed Zappos projected revenue north of $175
million for 2004, which would maintain their clip of doubling revenue every 12
months since 1999. Mike Moritz the active partner on the board from Sequoia, said that “we were impressed
with the focus that Zappos.com has on service and creating the best possible online
shopping experience," (For those
who do not know Moritz, Private Equity Week
once described Moritz as someone who “could create buzz just by buying a box of
Tic-Tacs and muttering something about how he likes the orange ones best.”)

At the other end of the customer service spectrum are companies
like AT&T Wireless and Bally Total Fitness. Both are legendary for terrible customer service. On an industry level, only used car
dealerships finish lower than cellular providers, and AT&T led the pack
before being acquired last year. Type
“Bally Total Fitness” into Google and the second hit is “ballysucks.net”

Bally bilked my for several hundred dollars a few summer
ago, so I still get the occasional Bally spam. When the most recent one arrived, I clicked
unsubscribe and it paradoxically said it could not unsubscribe me because my
name could not be found in their database.

AT&T is no longer among the living, and by
the looks of Bally’s financials it may not be around to torture customers much longer. The lesson here is a simple one: if your customers hate you, come clean. Give the money back to the investors, so that
they can be buy shoes online and be satisfied.